In case you haven't noticed, Wall Street is in the midst of a full-fledged bull market. But it hasn't always been this way.
Since this decade began, the ageless Dow Jones Industrial Average, widely followed S&P 500, and growth stock-powered Nasdaq Composite have flip-flopped between bear and bull markets in successive years, through 2023. Though these periods of volatility and uncertainty are unavoidable, the current bull market speaks to the power of time as an ally. With every correction and bear market throughout history eventually (key word!) getting put into the back seat by a bull market rally, it means any time can be ideal for long-term-minded investors to put their money to work.
Image source: Getty Images.
Furthermore, online brokers have made it easier than ever for retail investors to grow their wealth on Wall Street. In recent years, they've eliminated minimum deposit requirements and commission fees on common stock trades completed on major U.S. exchanges. In other words, any amount of money -- even $500 -- can be the perfect amount to invest.
If you have $500, a long-term mindset, and are certain this isn't cash you're going to need to pay bills or cover emergency expenses, the following three stocks stand out as no-brainer buys right now.
Amazon
The first astounding business that's begging to be bought with $500 right now is none other than e-commerce leader Amazon (AMZN +0.20%).
Most people are familiar with Amazon because it's the company behind the largest online marketplace in the world. In 2023, it's estimated that its e-commerce site accounted for almost 38% of domestic online retail sales. While this would, presumably, expose the company to downside during a U.S. recession, Amazon's online marketplace isn't as important to the company's bottom line as you might think.
NASDAQ: AMZN
Key Data Points
The bulk of Amazon's operating income and cash flow derives from three of its considerably faster-growing and higher-margin segments, none of which is more important than Amazon Web Services (AWS).
AWS entered 2024 holding a 31% share of the global cloud infrastructure service market. Businesses are continuing to shift a higher percentage of their information technology spending to the cloud, which bodes well for AWS. During the March-ended quarter, AWS surpassed $100 billion in annual run-rate sales.
The other two segments of importance for Amazon are subscription services and advertising services. With Amazon attracting around 2.5 billion visitors to its website each month, it shouldn't come as a surprise that advertising services are growing by a sustained double-digit percentage.
Meanwhile, Amazon possesses exceptional pricing power with its Prime subscription. Prime is a powerful tool that helps to keep subscribers within its product and service ecosystem.
Since Amazon reinvests most of its operating cash flow back into its business, cash flow is a far better measure than the traditional price-to-earnings (P/E) ratio to determine if the stock is a good "value." As of the closing bell on June 17, Amazon was trading at roughly 12 times estimated cash flow for 2025. That's considerably lower than the 23 to 37 times cash flow investors willingly paid to own Amazon stock throughout the 2010s, and demonstrates what an incredible value it is right now.
NYSE: IIPR
Key Data Points
Innovative Industrial Properties
A second no-brainer stock that makes for a surefire buy right now is real estate investment trust (REIT) Innovative Industrial Properties (IIPR +0.31%), or "IIP" for short. Since initiating a quarterly dividend seven years ago, IIP's payout has grown by a jaw-dropping 1,167%, and its yield has surged to north of 7%.
Innovative Industrial Properties is just like any other REIT, with one key twist. It aims to lease its properties for extended periods to (drum roll) cannabis companies. IIP acquires and leases medical marijuana cultivation and processing facilities, often with the goal of leasing these assets for 10 to 20 years.
Admittedly, marijuana stocks lost their buzz shortly after President Joe Biden took office. The industry had been expecting meaningful reforms, but had these hopes dashed over the last two years. The good news for cannabis stocks is that the U.S. Drug Enforcement Agency has proposed shifting marijuana to a Schedule III drug, which could brighten the horizons of the entire industry.
There are a couple of factors that make Innovative Industrial Properties special. The obvious is that its rental income is predictable. The company's weighted-average remaining lease term on the more than 100 properties it owns is nearly 15 years. Further, it's been able to rework master lease agreements or dispose of certain properties in the rare instances where tenants have been delinquent.
Another reason investors can trust IIP is the company's lease structure. As of the end of March, 95.2% of its operating portfolio was triple-net leased (also known as "NNN-leased"). Triple-net leases require tenants to cover virtually all property expenses, including maintenance, insurance, and utility costs. Removing these unknown expenses from the equation makes IIP's adjusted funds from operations (AFFO) all the more predictable.
Innovative Industrial Properties has also successfully leaned on its sale-leaseback program to expand its lease portfolio. With this program, IIP purchases properties for cash and immediately leases them back to the seller. It's a way for cannabis companies to get their hands on cash without having to rely on traditional financing methods. Meanwhile, it provides a steady source of AFFO expansion for IIP.
Image source: Getty Images.
Johnson & Johnson
The third no-brainer stock that makes for a genius buy with $500 right now is Dow component and healthcare juggernaut Johnson & Johnson (JNJ +0.86%). Johnson & Johnson, which is best-known as "J&J," has raised its base annual dividend for 62 consecutive years and is parsing out a yield (3.4%) that's well over twice the average yield of the S&P 500.
If you're looking for a good reason why J&J has underperformed in the current bull market, outstanding litigation concerning its now-discontinued talcum-based baby powder is the answer. The company is facing in the neighborhood of 100,000 lawsuits that allege this talcum-based baby powder causes cancer. J&J has, on two separate occasions, unsuccessfully attempted to settle this litigation.
While legal overhangs are never good news, Johnson & Johnson is generating plenty of operating cash flow, and it has more than enough cash on its balance sheet to cover whatever the final settlement might be. J&J is, after all, one of only two publicly traded companies to still bear the highest possible credit rating (AAA) from Standard & Poor's.
NYSE: JNJ
Key Data Points
What's made Johnson & Johnson such a phenomenal investment for so long is its consistency. As an example, its management team has purposely shifted the company's focus to high-margin pharmaceuticals. Aggressively reinvesting in internal drug development and collaborations ensures that J&J won't be a victim of the patent cliff.
Management has also overseen an organic and acquisitive expansion of the company's medical technologies segment. As the global population ages and access to preventative care improves, demand for medical devices should climb.
As I've pointed out many times before, J&J's consistency at the top has led to sustained growth. Since its founding in 1886, the company has had just 10 CEOs. Not surprisingly, adjusted operating earnings grew for 35 consecutive years before being temporarily disrupted by the COVID-19 pandemic. Few businesses deliver consistent earnings growth quite Johnson & Johnson.
The final piece of the puzzle is that J&J stock is cheaper than it's been in at least a decade. Shares can be scooped up for roughly 13 times forward-year earnings, which represents a 16% discount to its average forward earnings multiple over the last five years.
